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Network Solutions Liable For Sex.com Theft

by Rachel Konrad

Comparing Internet domain names to property such as homes and cars, a federal appellate court ruled Friday that Web registry Network Solutions Inc. could be liable for damages after a convicted forger purloined ownership of www.sex.com from an e-commerce entrepreneur.

If Web site names are property, the court contended, domain name registries should be responsible for safeguarding them -- no different from a valet who guarantees a client's car won't get stolen from a parking lot.

The 9th U.S. Circuit Court of Appeals Judge Alex Kozinski said courts should treat domain names, despite their virtual nature, exactly as they treat "a plot of land." Kozinski returned the case to the U.S. District Court in San Jose to be tried again.

Plaintiff Gary Kremen praised the ruling, the latest step in a lawsuit he filed in 1998 against NSI and Stephen Michael Cohen, who has served several prison stints for bank fraud and forgery.

"This was major victory, no doubt about it," Kremen said.

In 2001, a judge ordered Cohen to pay Kremen 5 million in damages -- roughly the sum Cohen made by building a Sex.com-centered porn empire. Kremen also won the rights to Sex.com, which he has expanded to Fetish.sex.com, Stars.sex.com and dozens of other porn sites. But shortly after the verdict, Cohen fled to Europe. He could not be reached for comment Friday.

Kremen is now commuting to his San Francisco office while living in the San Diego-area home Cohen surrendered to him -- the only payment Kremen has received. Kremen wants NSI to pay the remainder of the damages.

Representatives from NSI, the Mountain View subsidiary of Herndon, Va.-based VeriSign Inc., said Friday they would not comment on ongoing litigation. The case will likely be retried within a year.

Kremen, founder of Online Classifieds, requested and received from NSI the rights to Sex.com in 1994. In 1995, Cohen sent NSI a letter from a fictional administrator at Online Classifieds, saying the company had fired Kremen and no longer wanted Sex.com.

NSI complied without confirming details with Kremen, then gave the name to the next person to request it -- Cohen. Cohen built Sex.com into a multimillion dollar business within a few months.

The judge and plaintiff questioned why NSI would switch the domain name registry without so much as a phone call to Kremen. They also questioned why NSI administrators weren't suspicious of Cohen's letter, which requested that NSI not send e-mail to anyone at Kremen's company because it didn't have Internet access -- despite being named Online Classifieds.

"Cohen is obviously the guilty party here, and the one who should in all fairness pay for his theft," Kozinski wrote on behalf of all three judges hearing the case. "But he's skipped the country, and his money is stashed in some offshore bank account. ... It would not be unfair to hold Network Solutions responsible and force it to try to recoup its losses by chasing down Cohen."

Digital rights advocates praised the ruling. San Francisco-based Electronic Frontier Foundation submitted a brief to promote the idea that domain names should be considered property -- and NSI, Register.com and other registries should be responsible for safeguarding that property.

"Registrars are part of the fundamental architecture of the Internet, and they need to be held responsible for the mistakes they make," EFF attorney Jason M. Schultz said Friday. "The Internet is a great engine of democracy and free speech, and this decision means that people have something like a warranty when things go wrong."